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New Laws Prohibit Credit Checks in Other States – Is Pennsylvania Next?

October 18th, 2011

Are you familiar with Senate Bill 128?  If you regularly check job applicants’ credit as part of your screening process, you should be.  Senate Bill 128, if passed in it’s current form, would prevent employers from using consumer reports unless the information is either substantially job related (and the reason for the use of the information is disclosed in writing), or required by law.

The National Conference of State Legislature’s (NCSL) website indicates that changes in credit screening legislation are occurring from coast to coast.  Seven states now limit employers’ use of credit information in employment: California, Connecticut, Hawaii, Illinois, Maryland, Oregon and Washington.  To date, 58 bills in 28 states and the District of Columbia were introduced or pending in the 2011 legislative session.

Connecticut’s new credit screening law went into effect just a few days ago, on October 1, 2011.  Their law bars mandatory consent to credit checks by employees and applicants for all but a few types of employers.  Since then, California has also banned most employers from running credit checks on job applicants, and at least five more states are also considering similar bans.

Is our state next?

As an employer in Pennsylvania, you still have the right to check a job candidate’s credit.  Before you do so, however, you should consider:

  • how relevant the information you’re collecting is to the available position;
  • the cost involved versus the benefit to be gained;
  • whether or not your internal staff is trained in how to interpret the complex information contained in today’s credit reports;
  • whether or not there may be potential adverse effects to checking an applicant’s credit.

While the use of credit checks as an employment screening tool has grown over the past several years (with some 60 percent of U.S. employers using credit reports for some or all of their background checks), this practice is now becoming illegal for many employers.  In the future, it will be interesting to see if and how this ban will help people with financial problems find employment.

What is your take on the new credit screening laws?  Will it affect the way you screen and hire candidates?  We at Berks & Beyond would like to know.  Please leave your comments below.

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